What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-10-29 · 44 added, 149 removed, 352 unchanged (35% of the section changed)

3 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Net sales ( Note 3 )

2 unchanged sentences

General and administrative expenses

Other operating costs (income), net ( Note 15 )

Other operating costs, net ( Note 13 )

Operating income

2 unchanged sentences

Interest expense, net of capitalized interest

Loss on debt extinguishment ( Note 8 )

Earnings before income taxes

6 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Other comprehensive income (loss):

1 unchanged sentence

Changes in unamortized actuarial loss, net of tax expense of $ 5 and $ 7

Changes in unamortized net prior service credit, net of tax expense of $ 0 , $ 0 , $ 0 and $ 0

Changes in unamortized net prior service credit, net of tax (expense) benefit of ($ 1 ) and $ 1

Total other comprehensive income

4 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

SEPTEMBER 30,

Current assets:

12 unchanged sentences

Current liabilities:

Current maturities of long-term debt ( Note 9 )

Accounts payable

11 unchanged sentences

issued and outstanding:

749,037 thousand shares at September 30, 2021 and 747,385 thousand shares at

December 31, 2020

745,442 thousand shares at March 31, 2022 and 747,301 thousand shares at December 31, 2021

Other capital

5 unchanged sentences

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR-TO-DATE ENDED

QUARTER ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

Cash flows from operations:

5 unchanged sentences

Share-based compensation expense ( Note 12 )

Gain on sale of timberlands ( Note 14 )

Timber casualty loss ( Note 15 )

Loss on debt extinguishment

Receivables, net

7 unchanged sentences

Capital expenditures for timberlands reforestation

Acquisition of Alabama timberlands ( Note 14 )

Proceeds from note receivable held by variable interest entities ( Note 6 )

Proceeds from sale of timberlands ( Note 14 )

Acquisition of timberlands

Net cash from investing activities

3 unchanged sentences

Payments on long-term debt ( Note 8 )

Proceeds from borrowings on line of credit ( Note 9 )

Payments on line of credit ( Note 9 )

Proceeds from exercise of stock options

11 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Common shares:

10 unchanged sentences

Balance at end of period

Retained earnings (accumulated deficit):

Retained earnings:

Balance at beginning of period

14 unchanged sentences

NET EARNINGS PER SHARE AND SHARE REPURCHASES

VARIABLE INTEREST ENTITIES

PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

5 unchanged sentences

SHARE-BASED COMPENSATION

TIMBERLAND ACQUISITIONS AND DIVESTITURES

OTHER OPERATING COSTS (INCOME), NET

OTHER OPERATING COSTS, NET

RESTRICTED CASH

TIMBERLAND ACQUISITION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED SEPTEMBER 30, 2021 AND 2020

FOR THE QUARTERS ENDED MARCH 31, 2022 AND 2021

BASIS OF PRESENTATION

20 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Sales to unaffiliated customers:

9 unchanged sentences

Interest expense, net of capitalized interest

Loss on debt extinguishment

Earnings before income taxes

4 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Net sales to unaffiliated customers:

25 unchanged sentences

Our basic and diluted earnings per share were:

$ 0.64 during third quarter 2021 and $ 2.92 during year-to-date 2021;

$ 0.38 during third quarter 2020 and $ 0.68 during year-to-date 2020.

$ 1.03 during first quarter 2022 and

$ 0.91 during first quarter 2021.

Basic earnings per share is net earnings divided by the weighted average number of our outstanding common shares, including stock equivalent units where there is no circumstance under which those shares would not be issued.

1 unchanged sentence

QUARTER ENDED

YEAR-TO-DATE ENDED

SHARES IN THOUSANDS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Weighted average common shares outstanding – basic

10 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

SHARES IN THOUSANDS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Stock options

3 unchanged sentences

Concurrently, the board terminated the remaining repurchase authorization under the share repurchase program approved by the board in February 2019 (the 2019 Repurchase Program).

During year-to-date 2021, we repurchased 780,228 common shares for approximately $ 26 million under the 2019 Repurchase Program.

As of September 30, 2021, we had remaining authorization of $ 1 billion for future share repurchases under the 2021 Repurchase Program.

We did no t repurchase shares during year-to-date 2020.

During first quarter 2022, we repurchased 3,197,675 common shares for approximately $ 121 million under the 2021 Repurchase Program.

As of March 31, 2022, we had remaining authorization of $ 806 million for future share repurchases.

We did no t repurchase shares during first quarter 2021.

All common stock repurchases under the 2021 Repurchase Program were made in open-market transactions.

1 unchanged sentence

We record a liability for repurchases that have not yet been settled as of period end.

There were no unsettled repurchases as of September 30, 2021 or December 31, 2020.

There were 78,380 unsettled shares (approximately $ 3 million) as of March 31, 2022 and no unsettled shares as of December 31, 2021.

Inventories include raw materials, work-in-process, finished goods, as well as materials and supplies.

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

LIFO inventories:

8 unchanged sentences

raw material and product inventories, all material and supply inventories and all foreign inventories.

VARIABLE INTEREST ENTITIES

From 2002 through 2004, we sold certain nonstrategic timberlands.

As a result of these sales, buyer-sponsored and monetization variable interest entities, or special purpose entities (SPEs), were formed.

We were the primary beneficiary and consolidated the assets and liabilities of the SPEs involved in these transactions.

The assets of the buyer-sponsored SPEs were financial investments which consist ed of bank guarantees.

These bank guarantees were in turn backed by bank notes, which were the liabilities of the monetization SPEs.

Interest earned from the financial investments within the buyer-sponsored SPEs was used to pay interest accrued on the corresponding monetization SPE’s note.

During first quarter 2020, we received $ 362 million in proceeds from our final buyer-sponsored SPE at maturity.

The corresponding $ 302 million in liabilities of this SPE was paid in third quarter 2019.

PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

1 unchanged sentence

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Interest cost

5 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Interest cost

7 unchanged sentences

We update the year-end estimated fair value of pension plan assets in the second quarter of each year to incorporate final net asset values reflected in financial statements received after we have filed our Annual Report on Form 10-K.

During second quarter 2021, we recorded an increase to the beginning of the year fair value of the pension assets of $ 155 million, or 5 percent.

We also updated our census data that is used to estimate our beginning of the year projected benefit obligation for our pension plans, which resulted in a projected benefit obligation increase of $ 17 million, or less than 1 percent.

The net effect of these updates was a $ 138 million improvement in funded status.

This change in funded status was reflected on our Consolidated Balance Sheet as of June 30, 2021.

ACCRUED LIABILITIES

1 unchanged sentence

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

Compensation and employee benefit costs

1 unchanged sentence

Customer rebates, volume discounts and deferred income

Dividends payable

Taxes payable

LONG-TERM DEBT AND LINE OF CREDIT

In October 2021, we repaid our $ 150 million 9.00 percent notes at maturity.

In May 2021, we repaid our $ 225 million variable-rate term loan that was scheduled to mature in July 2026 .

In September 2020, we redeemed our $ 325 million 3.25 percent notes due in March 2023 .

A pretax charge of $ 23 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in third quarter 2020 for the make-whole premium in connection with the early extinguishment of the $ 325 million notes.

In March 2020, we issued $ 750 million of 4.00 percent notes due in April 2030 .

The net proceeds after deducting the discount, underwriting fees and issuance costs were $ 732 million.

In May 2020, a portion of the net proceeds was used to redeem our $ 569 million 4.70 percent notes due in March 2021 .

A net pretax charge of $ 11 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in second quarter 2020 for the make-whole premium in connection with the early extinguishment of the $ 569 million notes, partially offset by the write-off of an unamortized fair value step-up adjustment.

In March 2022, we completed a series of transactions that lowered our weighted average interest rate and extended our weighted average maturity by issuing $ 900 million in notes and using the net proceeds plus cash on hand to close cash tender offers for $ 931 million of principal in higher interest rate notes.

We issued $ 450 million of 3.375 percent notes due in March 2033 and $ 450 million of 4.000 percent notes due in March 2052 .

The net proceeds after deducting the discount, underwriting fees and issuance costs were $ 444 million and $ 437 million, respectively.

The net proceeds were used to retire $ 592 million of our 7.375 percent notes due in March 2032 , $ 161 million of our 8.500 percent notes due in January 2025 , $ 73 million of our 7.125 percent notes due in July 2023 , $ 65 million of our 7.950 percent notes due in March 2025 , and $ 40 million of our 7.850 percent notes due in July 2026 .

We paid holders an aggregate $ 1.2 billion in cash reflecting principal, premium to par and tender premium.

A net pretax charge of $ 276 million ($ 207 million after-tax) was included in the Consolidated Statement of Operations in first quarter 2022 for premiums to retire $ 931 million of principal plus unamortized debt issuance costs and unamortized debt discounts in connection with the early debt retirement.

In January 2020, we refinanced and extended our $ 1.5 billion five-year senior unsecured revolving credit facility, which expires in January 2025 .

Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks.

We had no outstanding borrowings on our credit facility as of September 30, 2021 and December 31, 2020.

We had no outstanding borrowings on our credit facility as of March 31, 2022 and December 31, 2021.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values and carrying values of our long-term debt and line of credit consisted of the following:

SEPTEMBER 30,

The estimated fair value and carrying value of our long-term debt consisted of the following:

DOLLAR AMOUNTS IN MILLIONS

Long-term debt (including current maturities) and line of credit:

Variable rate

DECEMBER 31, 2021

Long-term fixed rate debt (including current maturities):

Carrying value

Fair value (level 2)

To estimate the fair value of fixed rate long-term debt, we used the market approach, which is based on quoted market prices we received for the same types and issues of our debt.

We believe that our variable rate long-term debt and line of credit instruments have net carrying values that approximate their fair values with only insignificant differences.

The inputs to these valuations are based on market data obtained from independent sources or information derived principally from observable market data.

We believe that our line of credit has a net carrying value that approximates its fair value within an insignificant difference.

The inputs to the valuations of our long-term debt are based on market data obtained from independent sources or information derived principally from observable market data.

The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at the measurement date.

Fair Value of Other Financial Instruments

We believe that our other financial instruments, including cash and cash equivalents, short-term investments, and receivables and payables, have net carrying values that approximate their fair values with only insignificant differences.

We believe that our other financial instruments, including cash and cash equivalents, short-term investments, receivables and payables, have net carrying values that approximate their fair values with only insignificant differences.

This is primarily due to the short-term nature of these instruments and the allowance for doubtful accounts.

8 unchanged sentences

have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated.

As of September 30, 2021, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $ 64 million.

As of March 31, 2022, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $ 62 million.

These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet .

2 unchanged sentences

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Balance at beginning of period

12 unchanged sentences

Translation adjustments

Total other comprehensive income (loss)

Total other comprehensive income

Balance at end of period

4 unchanged sentences

SHARE-BASED COMPENSATION

Share-based compensation activity during year-to-date 2021 included the following:

Share-based compensation activity during first quarter 2022 included the following:

SHARES IN THOUSANDS

20 unchanged sentences

Calculated as an average of the high and low prices on grant date.

TIMBERLAND ACQUISITIONS AND DIVESTITURES

Washington Divestiture

On April 30, 2021, we announced an agreement to sell 145 thousand acres of timberlands in the North Cascades region of Washington.

On July 7, 2021, we completed the sale for $ 261 million in cash proceeds, which is net of purchase price adjustments and closing costs.

This transaction was structured as a like-kind exchange along with the Alabama acquisition discussed below.

As a result of the sale, a gain of $ 32 million was recorded in the Timberlands segment in our third quarter 2021 Consolidated Statement of Operations .

This divestiture is not considered a strategic shift that has, or will have, a major effect on our operations or financial results and therefore does not meet the requirements for presentation as discontinued operations.

Alabama Acquisition

On February 25, 2021, we announced an agreement to purchase 69 thousand acres of southwest Alabama timberlands for approximately $ 149 million.

We completed the purchase on April 27, 2021 and recorded $ 148 million of timberland assets in “Timber and timberlands at cost, less depletion” and $ 1 million of related assets in “Property and equipment, net” on our Consolidated Balance Sheet .

As discussed above, this transaction was structured as a like-kind exchange.

Montana Divestiture

On December 17, 2019, we announced an agreement to sell 630 thousand acres of Montana timberlands, which was part of our Timberlands business segment.

On March 26, 2020, we completed the sale for $ 145 million in cash proceeds, which is net of purchase price adjustments and closing costs.

Due to the impairment recorded during fourth quarter 2019, no material gain or loss was recorded as a result of this sale.

The divestiture was not considered a strategic shift that had, or will have, a major effect on our operations or financial results and therefore did not meet the requirements for presentation as discontinued operations.

OTHER OPERATING COSTS (INCOME), NET

Other operating costs (income), net were comprised of the following:

OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

QUARTER ENDED

YEAR-TO-DATE ENDED

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2021

SEPTEMBER 2020

SEPTEMBER 2021

SEPTEMBER 2020

Foreign exchange losses (gains), net

Gain on sale of timberlands

Litigation expense, net

Product remediation recovery

Research and development expenses

Timber casualty loss

Total other operating costs (income), net

Timber Casualty Loss

In September 2020, forest fires in the state of Oregon, commonly referred to as the Holiday Farm, Beachie Creek, Riverside, and Archie Creek fires, spread from adjacent lands onto portions of our Oregon timberland properties.

We recorded a timber casualty loss of $ 80 million in third quarter 2020 which represented the estimated book value of timber and related assets that could not be salvaged based on information available at that time.

The loss was attributable to our Timberlands segment and was recorded within “Other operating costs (income), net” in the Consolidated Statement of Operations .

During year-to-date 2021, we have harvested a substantial majority of our planned salvage volume in Oregon.

The additional information obtained from our salvage operations has not resulted in a change to the estimated loss previously recorded.

Total other operating costs, net

As a real estate investment trust (REIT), we generally are not subject to federal corporate income taxes on REIT taxable income that is distributed to shareholders.

6 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents and restricted cash

Amounts included in restricted cash as of September 30, 2021 are comprised of proceeds held by a qualified intermediary that are intended to be reinvested in timber and timberlands through a like-kind exchange transaction.

Amounts included in restricted cash as of September 30, 2020 were primarily comprised of proceeds held by a qualified intermediary that were subsequently reinvested in timber and timberlands through a like-kind exchange transaction, as well as additional funds held in escrow related to that transaction.

(1) Amounts included in restricted cash as of December 31, 2021 were comprised of proceeds held by a qualified intermediary that were intended to be reinvested in timber and timberlands through a like-kind exchange transaction.

In first quarter 2022, the proceeds were released as a like-kind property was not identified.

TIMBERLAND ACQUISITION

On April 14, 2022, we announced an agreement to purchase 81 thousand acres of North and South Carolina timberlands for approximately $ 265 million.

The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements